Fed’s Powell says inflation could be ‘higher and more persistent’ than expectations

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Federal Reserve Chairman Jerome Powell said that inflation could be more aggressive and last longer than central bank expectations.

Powell, fresh out of a two-day meeting with top Fed officials, told reporters that while inflation could be more intense than previously thought, indications are that it will settle back down in the future and the Fed is still not ready to begin talks about raising interest rates to mitigate price increases.

“As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect,” Powell said during a Wednesday afternoon news conference.

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“Indicators of long-term inflation expectations appear broadly consistent with our longer-run inflation goal of 2%,” he continued. “If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we would be prepared to adjust the stance of policy.”

Consumer prices increased 5.4% for the year ending June, the highest rate of inflation since 2008, the Department of Labor said earlier this month. The figure was well above predictions of 4.9%.

The Fed is targeting 2% sustained inflation and full employment and has said that it is not concerned about inflation overshooting that goal as long as it sinks back down. Powell noted on Wednesday that current inflation is “well above” 2% and also emphasized that there is “absolutely no sense of panic.”

The chairman said that the central bank sees current price growth as driven by the supply side, which is having trouble handling the massive spike in demand as the United States emerges from the COVID-19 pandemic.

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Following the meeting, the Federal Open Market Committee hinted at tapering its purchases of government bonds, which would be a first step toward reversing the emergency easy-money policies implemented as the pandemic took hold last year.

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Tags: News, Jerome Powell, Inflation, Federal Reserve, Bank, Monetary Policy

Original Author: Zachary Halaschak

Original Location: Fed’s Powell says inflation could be ‘higher and more persistent’ than expectations